Discussion
AZO has been very weak relative to SPX of late, and today it’s closing in on breaking down through its early June relative lows. Given the superb strength out of the defensive sectors today I found AZO’s weakness curious, so I went back and looked at how it performed relative to XLU heading into the 2007 and 2020 recessions. Interestingly, heading into those recessions AZO underperformed both SPX and XLU while XLU outperformed SPX. Gut says this is a reach at this point, especially given the fact XLU is at best in the very early stages of establishing a relative strength uptrend, but it’s interesting nonetheless to keep in the back of the mind given the economic outlook right here and now led by consumers suddenly becoming more interest rate sensitive as we head into the back half of the year.